Telecoms Hungry for Next Billion Callers

Emerging markets look like the best bet for the next wave of wireless customers, according to talk at ITU Telecom World in Hong Kong

by Bruce Einhorn

One of the big topics discussed at this week's ITU Telecom World 2006 forum in Hong Kong has been how to narrow the digital divide by connecting people in poorer countries to the Internet. The estimated 1 billion Internet users and 2 billion-plus mobile phone subscribers worldwide are mostly clustered in wealthier markets. Now telecom and IT executives are on a quest for "the next billion," and that growth is expected to come primarily from developing markets.

Why focus on emerging markets? After all, most customers in those countries can't afford the fancy phones that drive up average selling prices. But already a majority of the industry's telecom connections come from developing markets. By the end of the decade the number will increase to 69%, according to market research firm Gartner (IT).

And customers in the developing world are willing to spend a larger percentage of their disposable income on communications, Gartner says. "The hunger for improved connections is strong," says Jouni Forsman, a Gartner research director, via a press release. "The high level of disposable income being spent on communications in developing countries today is clear evidence that the telecoms industry is mission critical in the emerging world."

Making Customers for Life

Paul Jacobs, CEO of Qualcomm (QCOM), argues that one reason these markets are so crucial is they represent an investment in the future. His company has been helping partners in India launch mobile phones using Qualcomm's CDMA standard that cost under $30.

There's not a lot of profit for Qualcomm in such a phone, but Jacobs argues that customers who buy such basic products now will be able to buy fancier stuff later. "We don't think we're going to make a lot of money on the first phone that somebody buys," he says. "But eventually [that customer] will buy more and more."

As companies increasingly focus on emerging markets, there are other benefits. Jacobs, for instance, argues there's a lot of innovation that comes from focusing on developing inexpensive products for emerging markets. "It used to be that you would invest in the high-end services and they would trickle down," says Jacobs. "Now we invest equally in the low end and high end and things trickle to the middle."

Breaking the Literacy Barrier

Motorola (MOT) also boasts that focusing on emerging markets results in innovation. For instance, in late November, Motorola launched the Motofone—a $30 handset designed in India—with rural users in mind. For many, it will be their first-ever phone, and Motorola's designers have included features designed to meet those special needs.

One example: The phone has a speaker that can give audio instructions to the user, rather than presenting them in text form. The reason, explains Thomas Quirke, a marketing director for Motorola, is to break down a barrier that wouldn't occur to engineers designing products for other, more developed markets. "The phone makes the presumption that you may not be literate," he says.

The Motofone's designers also have thought about how to meet the needs of consumers in places where electricity is not cheap or reliable. For instance, the handset has a reflective display that people can easily see when outdoors, rather than the traditional back-light of an LCD display that consumes a lot of power. For easier viewing, the Motofone's display also can switch from black-on-white to white-on-black. And since power supply in the countryside is not always reliable or plentiful, the phone has a battery with a stand-by time of two weeks.

Watching Copper Prices

Whether you're talking about spiffy new handsets or more conventional phones or PCs, a big question for next-billion advocates is how to connect these devices to the networks. Many people attending ITU argue that the answer should be wireless.